Q&A: C Ventures’ Ben Cheng

Q: Can you describe your approach to investment?

A: Our strategy is very simple. We don’t see ourselves as a financial investor – we are strategic. Whatever we invest in, we have to have an angle related to Adrian’s ecosystem, including Chow Tai Fook, Rosewood, New World Group, K11, and others. We don’t use the branding of K11 Investment anymore because we don’t want to just be associated with shopping malls. We’re a small team of 15 and we have done about 30 deals so far, but we benchmark ourselves against large players in the region like Sequoia and Hillhouse. We’re not there yet but whatever Adrian does, his expectation is to be industry leading. I have been at C Ventures since day zero, pushing our team to get there.

Q: It’s very much the corporate VC model…

A: Yes, but the capital comes from Adrian, not the companies. We touch about 15-20 million consumers every day. That’s so powerful. But we don’t have an industrial background, so we also partner with other corporate VCs. We’ve partnered with Tencent on a lot of deals, and Country Garden recently invested in one of our portfolio companies. I think you will see more corporate VCs being preferred partners for start-ups in the next five years, whereas traditional financial VC will become less preferred because it’s just money. Ultimately, an entrepreneur wants resources. If you’re a hot company, you don’t lack money. At that point, your differentiation factor is who can give the most value, not just money.

Q: How does this work in practice?

A: We invested in a company called Aibee, one of the largest facial recognition companies in China, and it’s powering all our shopping malls and commercial buildings nationwide. You don’t need to swipe a card to enter a building – you just show your face, and it works even if you’re wearing a mask. Aibee analyzes the traffic and demographics of the audience and gives advice on changing the store mix in malls. Last year, we co-led an investment with Tencent in Fiture, which makes a smart fitness mirror we can plug into Rosewood and K11 serviced apartments and cross-sell to our residential clients. We got in at around a $200 million valuation and nine months later, the company is a unicorn.

Q: Has a strategic focus helped deal sourcing?

A: We recently made an investment in [accessory brand] Casetify, which is a deal I chased for more than four years. It’s one of those companies in Hong Kong you have to wine and dine because they’ve been profitable since their first month of operation 10 years ago and never needed cash. Now they want help expanding in China and I said, ‘We have a lot of resources to offer but only if you become our portfolio company.’ We referred more than 30 candidates to them for a China general manager, and they picked one. That’s how we add value – we refer people, help open stores, make connections. I don’t think any other funds in the market are actively doing that.

Q: What is the strategy behind Casetify?

A: I guarantee right now they are the largest phone case company in the world, but they are not a phone case company – they are an IP [intellectual property] collaboration platform. They’re using phone cases as a medium for exclusive partnerships with the NBA and Pokémon. They’ve collaborated with NASA, the Korean boyband BTS, the artist David Shrigley, and the French football team PSG. Every case is customizable, letting millennials associate themselves with anything they like. People might think it’s just a case. But it’s a statement of culture, what people believe in, and affordable luxury. They recently expanded into water bottles and headphones and have a lot more plans. This is how we think about culture.

Q: Building cultural ecosystems is part of C Ventures’ mission. What does this mean?

A: We don’t bet on fashion brands or artists – we bet on platforms. We want to bring whatever is good and new and beneficial to the next generation. With Fiture for example, COVID-19 has changed consumer behavior, so people want to work out at home. And the mirror is so thin, it fits with a Chinese audience whose homes are not always big enough for a bike. Switch it off and it’s a mirror; switch it on, there’s a trainer. There’s a social element, a competition element, and a gaming element, which makes it fun. We’re also looking at a company that makes a container with a 100% plant-based material that is carbon-negative. That’s another culture we’re seeing in the next generation.

Q: What is the role of VC in the traditional retail world?

A: Corporate VC will become a platform to incubate new companies and extract synergies like we’re doing now. And traditional players that don’t have a VC arm will benefit from the new concepts. VR AR [virtual reality and augmented reality] is something we’re very excited about. In the next few years, you’ll see a lot of that coming up. We’re also seeing new concepts in beauty, toys, and food and beverage. Millennials don’t want McDonald’s and KFC – they want something they can associate with their generation. In 10 years, there will be new brands for the newer generations, but the sustainability and health trends are picking up, and I think they’re here to stay.

Q: What’s your vision for brick-and-mortar?

A: It’s huge. A lot of people that say with COVID and online shopping, nobody is going out. But after experiencing two quarantines, I can tell you that you need to go out. It’s human nature – the need to hang out in group settings and visit offline spaces will be here to stay. What’s going to change is that the offline space cannot be boring. It cannot be just like a shopping mall. You will have a lot of tech elements and people will expect more. Offline will be challenging in the sense that it will require a lot of the operator. They will need to bring something new to the consumer, and with China specifically, consumer behavior changes so fast, we look at it on a six-month timeframe.

Q: How do you see C Ventures developing in the future?

A: We have to expand into different horizons. First of all, we are expanding our team in China – where we have about 10 people now – because you need a local team to source deals. Second, we’re expanding in products because people see us as venture, but we are more than that. [Artisan Acquisition, a special purpose acquisition company (SPAC) sponsored by Adrian Cheng, raised $300 million through a NASDAQ offering in May; Ben Cheng is its CEO. The SPAC has a two-year horizon to make an investment, and a target is yet to be identified.]

Q: What does the SPAC bring in terms of going multi-strategy?

A: We see that as our private equity arm because, in venture, you can’t put everything into one deal. In the future, we might want to make C Ventures a subsidiary of, let’s say, C Capital. The firm would have a venture arm, a PE arm, and maybe a few years down the road, a hedge fund arm and a credit arm. That’s how we see ourselves. We want to be a full-fledged investment platform.

Q: So, raising third-party capital with a fund structure is on the cards for the future?

A: I don’t know – we’re not there yet. But if we become big enough, institutionalizing is something that we should do. We have seen similar cases in the market such as L Capital, Shunwei, and Tencent. When a platform grows to a certain size, it’s good to institutionalize. But right now, that’s a bit faraway for us. We’re still growing, and we need to work harder to be where we want to be.

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• Topics
• Greater China
• GPs
• Technology
• Consumer
• Real estate
• Hong Kong (China)
• China
• corporate venture capital
• C Ventures